By Bill Wade
Has a larger collection of negative, arrogant and out-of-touch politicians ever been in charge of an asset as dear as this country and its citizens?
We are not talking “glass half empty” pessimism. Rather, our elected representatives don’t even trust us to know how to drink from the damn glass.
The energy shortage is a prime example of bureaucrats trying to lead at a macro level while blind to the complexities at the micro level.
Like earlier prophets of doom, they fail to appreciate capitalism’s ability to adjust and innovate. In 1798, British economist Thomas Malthus predicted that the imbalance between population growth and food production would cause the world to starve to death. Doomsayers called it Malthus’ “Iron Law.” It was neither iron nor law.
Malthus fell into the old trap of underestimating everyone’s intelligence but his own. He was incapable of imagining combines, tractors, insecticides and fertilizers.
Today, the Luddites of both parties in Washington are proposing regulations that cling to the belief that they can define absolutes, even in a world of rapidly changing technologies. It’s not the first time.
Some examples:
- A presidential commission appointed by Hoover in 1929 later reported to Roosevelt on how to plot our course through 1952. The 1,600 page report was 13 volumes prepared by 500 “researchers.” There was not a word about atomic energy, jet propulsion, mass communication, antibiotics, transistors or computers.
- The World’s Fair of 1939, dedicated to the “World of Tomorrow,” failed to suggest any of these advances, as well as space exploration.
Ronald Reagan’s key economic advisor, Walter Wriston, said it well: “Our latter-day Malthusians, whose forecasts are often dignified with computer print-outs (which must substitute for ox entrails), appear oblivious to the fact that free markets, given the proper incentive and freedom to act, have repeatedly found substitutes for dwindling resources.”
More examples:
- The U.S. was denied 90 percent of its natural rubber during World War II, but technological ingenuity created synthetic rubber, now more widely used than the natural product.
- One of the most common substances in the world is bauxite, but it was not regarded as much of an asset until the method for making aluminum was perfected.
- Coal was not even considered a resource before the Steam Age.
- Uranium was considered worthless prior to the Atomic Age.
Look back on a previous U.S. energy crisis. From the Pilgrims through to the Civil War, a major source to fuel artificial lighting was whale oil. The Civil War disrupted whaling. Alcohol (its substitute) was taxed heavily and its price nearly doubled to $2.55 a gallon. Naturally there were cries of profiteering and demands for Congress to “do something.” The government, to its credit, made no move to ration whale oil or to freeze its price or to tax the “excess profits” of the whalers.
Prices were permitted to rise. Consumers began to use less whale oil and the whalers invested in new ways to increase productivity. Meanwhile men with vision and capital began to develop kerosene and other petroleum products. By 1896, the price of whale oil dropped to 40 cents a gallon.
OPEC, take note.
Shortages, then and now, can be eliminated when prices are allowed to exercise their age-old functions of “market clearance.”
Shortages, then and now, become a crisis when government intervenes. A free market is not chaos but a continuous economic referendum. Government intervention destroys that path to a democratic decision.
The result is non-economic. The current energy crisis furnishes another fork in the road.
We can create a new ICC for oil and gas with the predictable result that current market dislocations will become institutionalized and temporary scarcity will be regulated into permanent shortages.
Or we can permit the innovative talents of the American people to function. Our current energy problem will be solved, probably in ways that no one here can now foresee.
And the sky won’t fall!
Bill Wade recently has published a new book titled Aftermarket Innovation. He can be reached at www.wade-partners.com.
The views expressed in the Guest Editorial are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of Truck Parts & Service magazine.
